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AutoSave . OFF A B ? CG ... Finance Prompt Q Home Insert Draw Design Layout References Mailings Review View Acrobat Picture Format . Tell

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AutoSave . OFF A B ? CG ... Finance Prompt Q Home Insert Draw Design Layout References Mailings Review View Acrobat Picture Format . Tell me Share Comments Calibri (Bo... ~ 12 AA Aav AaBbCcDdEe AaBbCcDdEe AaBbCcDc AaBbCcDdE AaBb( AaBbCcDdEE AaBbCcDdEe AaBbCcDdEe AaBbCcDdEe AaBbCcDdEe AaBbCcDdEe CE Paste BIUvab x x|A DAY Norma No Spacing Heading 1 Heading 2 Subtitle Subtle Emph Emphasis Intense Emp.. Strong Quote styles Dictate Create and Share Request Pane Adobe PDF Signatures You just started a new job as a Finance Manager at XYZ Corp. As you are starting to get acquainted with the company, you requested the Balance Sheet for the Current Fiscal Year 2018, the Income Statement and a few other items that you deemed appropriate. You can find all of those in the table below and in the Excel file attached Income Statement for the Current Fiscal Year Sales $43,000,000 COGS 000,000 Other expenses $5,000,000 Depreciation $2,000,000 EBIT $6,000,000 Interest $2,000,000 Taxable income $4,000,000 Taxes (40%) $1,600,000 Net income $2,400,000 Dividends $600,000 Add to RE $1,800,000 Balance Sheet, Current Fiscal Year Assets Liabilities & Owners' Equity Current Assets Current Liabilities Cash $500,000 Accounts Payable $1,000,000 Accounts Receivable $1,000,000 Notes Payable $3,000,000 Inventory $2,000,000 Total CL $4,000,000 Total CA $3,500,000 Long Term Debt $10,000,000 Fixed Assets Owners' Equity Net PP&E $25,000,000 Common Stock $6,500,000 Retained Earnings $8,000,000 Total Equity $14,500,000 Total Assets $28,500,000 Total L & OE $28,500,000 Additional information Taxes 10% Market-to-Book Ratio 1.25 Shares Outstanding 1,000,000 Depreciation of New Assets 25.00% Dividend growth in the last 7 years 8.00% Note: The Market-to-Book Ratio is equal to the Market Value per Share divided by the Book Value per Share. The Book Value per Share is the Total Owners' Equity divided by the number of outstanding shares. This and other financial statements ratios can be found on Chapter 3 in the textbook. Page 1 of 1 0 words English (United States) Focus E 160%AutoSave . OFF NA ? CG ... Finance_Q3 - Saved to my Mac Q Home Insert Draw Design Layout References Mailings Review View Acrobat ? Tell me Share Comments Calibri (Bo... ~ 12 AA Aav Ap REEVEVEE AaBbCcDdEe AaBbCcDdEe AaBbCcDc AaBbCcDdEe AaBb( AaBbCcDdEe AaBbCcDdEe AaBbCcDdEe AaBbCcDdEe AaBbCcDdEe AaBbCcDdEe Paste BI Ub x x|A DAY Norma No Spacing Heading 1 Heading 2 Title Subtitle Subtle Emph Emphasis Intense Emp... Strong Quote styles Dictate Create and Share Request Pane Adobe PDF Signatures Finance Q3 Question 3. The quarterly investors call is approaching and you were asked to comment on the EPS and projected EPS based on the growth forecast of 10%. (a) Compute the EPS for the Current Fiscal Year (b) What is the projected EPS with the same assumptions as in Question _? You are a bit skeptical of the projected 10% growth in sales and decided to look at a much less aggressive long-run growth scenario of 3.5% growth in sales. (c) What is the projected EPS for a 3.5% growth in sales? If the dividend payout ratio remains the same, how much is paid per share? As some external financing will be needed to accommodate any growth, you started looking into raising debt and/or equity. Since your company would be mostly described as a small- cap US company, you looked at market data to help you determine your costs of equity and debt. (d) Using the information on slide 9 on the deck from Week 5, what should be the risk premium for appropriate market for your company? Assume the risk free is given by 1mo Treasury Bills. (e) Looking at historical stock market data, you determined that your beta is roughly 1.4 with respect to the market benchmark you used above to compute the risk premium. What should your cost of equity be? (f) In order to get a little more comfortable with the number computed above, you decided to look at the cost of equity using the dividend growth corresponding to the 3.5% sales growth scenario from [(c) If you decide to use the average dividend growth value from last 8 years, what is the cost of equity using this approach? Do you think this is a reliable number? If so, why not? In order to determine your cost of debt, you decided to look at your long term debt, which is structured as a single 20yr bond with semi-annual coupons, a coupon rate of 10%, and is currently trading at 83%. Page 1 of 1 0 words English (United States) Focus To E 210%

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